MW ServiceNow says AI is 'really kicking in' - but it's not enough to help the stock

By Emily Bary

Shares of the software company are set to extend declines despite a better-than-expected forecast

ServiceNow CEO Bill McDermott says all the company's big deals now include five or more AI products.

Even upbeat guidance from ServiceNow wasn't enough to shake negative software sentiment.

Software stocks have taken a beating in recent months, reflecting questions about whether artificial intelligence will help or hurt traditional players, as well as the general sense that chip companies are seeing clearer AI returns in the present day. ServiceNow's stock (NOW) is down 31% over a three-month span, while the iShares Expanded Tech Software ETF IGV is off 17%.

ServiceNow shares were off another 3.6% in Wednesday's extended session, despite better-than-expected quarterly results and a rosy forecast.

The software company models $3.65 billion to $3.655 billion in subscription revenue for the first quarter, while analysts had been looking for $3.58 billion. Looking at the full year, the company is calling for $15.53 billion to $15.57 billion on that metric, whereas the FactSet consensus was for $15.21 billion.

But Evercore ISI analyst Kirk Materne noted a potential point of contention. He wrote that the first-quarter guidance factors in contributions from the company's Moveworks acquisition, and otherwise would've been roughly in line with expectations.

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CEO Bill McDermott said AI is helping to drive momentum for the company, as "all" its big deals include at least five AI products. He argued that ServiceNow helps companies put things like large language models into practice, which is increasingly of interest to customers.

There's a "meaningful difference between giving enterprises access to an AI model and actually building that model into workflows where the decisions are made," he told MarketWatch.

In McDermott's view, ServiceNow has been lumped in with software-as-a-service providers, when it offers more than a "point solution," but rather a "platform" that lets customers infuse AI into disparate elements of employee workflow.

Revenue in the fourth quarter amounted to $3.57 billion, while analysts had been looking for $3.53 billion. Subscription revenue came in at $3.47 billion, up 21% from a year before and above the $3.42 billion consensus view.

"You couldn't possibly have numbers of this scale without AI really kicking in," McDermott said.

Read: How to compete with AI in a bleak job market, according to this software giant's CEO

-Emily Bary

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January 28, 2026 17:46 ET (22:46 GMT)

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